53 Listed Companies Received 'Adverse Opinions' in Audit Reports Last Year... 97.9% Received Unqualified Opinions

Financial Supervisory Service Analyzes Audit Reports of 2,511 Listed Companies

Last year, the proportion of unqualified audit opinions for listed companies was 97.9%. The Financial Supervisory Service (FSS) evaluated that the new accounting system has been established following the implementation of the new External Audit Act.

As of the end of March this year, the FSS analyzed audit reports of 2,511 companies, excluding 78 foreign corporations, paper companies, and others from a total of 2,589 listed companies. It revealed that the proportion of unqualified opinions in the 2022 fiscal year audit reports was 97.9%. The FSS assessed that this has gradually improved since the enactment of the new External Audit Act. The unqualified opinion ratios were △97.2% in 2019 △97% in 2020 △97.2% in 2021 △97.9% in 2022.

Fifty-three listed companies received adverse opinions, a decrease of 15 from 68 in the previous year. Among these, seven received qualified opinions and 46 received disclaimers of opinion, with disclaimers showing a declining trend since peaking in 2020. The main causes of adverse opinions were audit scope limitations (45 companies) and going concern uncertainties (26 companies). If a company had multiple reasons for an adverse opinion, they were counted multiple times.

There were 2,458 companies (97.9%) that received an "unqualified" opinion on their audit reports. Among companies with unqualified opinions but noted going concern uncertainties, 85 companies were identified, of which 61 (71.8%) were small-sized companies with assets under 100 billion KRW.

The FSS analyzed that the proportion of unqualified opinions among auditor-designated companies was 2.6 percentage points lower than that of freely commissioned audits, with the gap decreasing annually. This was attributed to an increased proportion of periodic designations for listed companies with sound financial conditions and low audit risk. Additionally, it noted that smaller companies tended to have weaker financial structures and inadequate internal controls. The periodic designation rate increased from 28.9% in 2020 and 41.8% in 2021 to 46.7% last year.

By asset size, the proportion of unqualified opinions was proportional to company size. Listed companies with assets under 100 billion KRW had the lowest unqualified opinion ratio at 95.6%.

There were 289 listed companies that included "emphasis of matter" paragraphs in their audit reports, a decrease of 283 from the previous year. An emphasis of matter is a matter noted by auditors in the audit report that does not affect the audit opinion but is important for understanding the financial statements and requires users’ attention. The significant decrease was mainly due to fewer emphasis of matter paragraphs related to the impact of COVID-19 compared to the previous year. Other emphasis matters related to prior period financial statement adjustments and significant transactions decreased, while those related to changes in business environment such as mergers slightly increased.

The FSS stated, "The number of companies with adverse opinions has been decreasing annually since the 2020 fiscal year, indicating that the new External Audit Act is being established," and added, "The proportion of unqualified opinions is also maintaining a certain level." It emphasized, "Users of audit reports should be cautious about the risks of companies that received unqualified opinions but have going concern uncertainties noted."

Meanwhile, the proportion of adverse opinions on internal accounting control system audits was 2.5% (38 companies), which is 2.8 times higher than the previous year. This increase is interpreted as resulting from the expansion of internal accounting control audit targets and the strengthening of certification levels from review to audit. Among the 38 adverse opinions, 20 were adverse opinions and 18 were disclaimers of opinion, with 21 companies also receiving adverse opinions on their financial statement audits.

This content was produced with the assistance of AI translation services.